Fifth Circuit: No Class Action in Enron Shareholders’ Suit
The Fifth Circuit just ruled that Enron shareholders cannot proceed with a class-action lawsuit against investment banks for their alleged role in the fraud that led to Enron’s collapse. The ruling reverses a decision by Judge Melinda Harmon, who had granted class certification. Here’s the opinion.
“As we have recognized, class certification may be the backbreaking decision that places ‘insurmountable pressure’ on a defendant to settle, even when the defendant has a good chance of succeeding on the merits,” said the court.
The ruling is a big blow to Bill Lerach, the plaintiffs’ lead lawyer, quoted in an AP story. “We think it is unfair and wrong under the law,” he said. “The basic holding of the court is that even if the banks participated knowingly in a scheme to defraud investors in Enron’s collapse, you cannot have a class action against the banks.”
Lerach said he will likely appeal to the Supreme Court. A trial in the shareholders’ suit was expected to begin next month, but now will be postponed.
A link to the full text opinion, anyone? Can’t find it anywhere…
It is a shame that it took this long for this decision to be rendered. One of the most fundamental flaws and unfair aspects of civil litigation is that a plaintiffs gets an immediate appeal of a motion to dismiss, but defendants have to wait until costly discovery has been concluded and a trial to get an appeal. Judge Harmon used the wrong standard from day one, ignoring the Supreme Court decision in Central Bank concerning (the lack of) liability for aiding and abetting. It took years, and until an until an immediately appealable class certification order was issues, before the banks could get to the Fifth Circuit, which quickly and clearly said Harmon was wrong. The lack of appealability of a denied motion to dismiss caused the banks to spend hundreds of millions of dollar defending this case. The only winners are the lawyers.
Now, what was that story everyone was telling about Enron?
Why doesn’t anyone in this country want to take responsibility for their own actions. If you are dumb enough to believe Wall Street and their coconspirators, the company executives, you deserve to lose all your money. How do you think all the large hedge funds make all their money, they figured something out.
Judge Dennis’ concurrence is the more interesting read and the possible hook for en banc or Supreme Court review.
I am not sure I agree with the concurrence. And I also do not agree that a two Circuit split will result in a cert petition being granted.
It is surprising to me that adding pressure to settle is enough to kill a case. I thought the merits of the case might be more important the settlement posturing. It smells bad to me.
(I’m taking this from the article quote–I haven’t read the decision yet.)
6:00,
How can the concurrence form the basis for a rehearing when it reaches the same result (i.e., is a concurrence)? If the majority had reached the issue for reversal discussed in the concurrence, which it expressly declined to do, it might have agreed. Either way, the Fifth Circuit is not likely to rehear en banc a case that offers two compelling reasons for reversal. Also, as to SCOTUS, cert is not likely to be granted here, given that the cases in Lerach’s favor from the Eight Circuit are counter to the Supreme Court’s own prior statements and the opinions of the Second, Ninth and Seventh Circuits. This is not a case of the true Circuit split. The Eighth Circuit is an outlier.
It is the Ninth Circuit, not the eighth that is the outlier. Oops.
My point was only that the concurrence lays out the issues (i.e. reach of Central Bank and Affiliated Ute; who has burden of proving/rebutting fraud on the market; what is “deceptive conduct”; joint and several liability under the PSLRA etc.) that may form the basis of a petition by plaintiffs for en banc or Supreme Court review.
The Fifth Circuit’s opinion can be found in the above story or from the Fifth Circuit’s website here:
http://www.ca5.uscourts.gov/opinions%5Cpub%5C06/06-20856-CV0.wpd.pdf
Vietnam tour operator:
Why are you spamming? WSJ Law Blog readers are not interested in your Asian sex tours.
How could the banks not be liable to the shareholders for the business they did with this criiminal enterprise? Would someone please explain that to me?
In my opinion, if this decision is not overturned by a higher court, this would be fodder for the greatest investor injustice ever ruled on by a judge.
Too bad for those people that were forced out of retirement because their 401k’s were locked up in Enron. I mean, how many prospectus’ can you print with $40 billion?!
So this judge is basically absolving much of the responsibilities of defendants in securities cases (didn’t Fastow sat these defendants may have been in the know?) outside of the company’s own doors? Fraud doesn’t get more egregious than this case! A free pass?! What a scam and horrific black eye on the system that woefully failed investors! All, in my opinion.
…there is no such term as due diligence due to huge corporate stock climbers…by any banks…or to any banks…to any customers…to any employees…
…the same goes for the farmer who wants a loan…
…it’s as simple as numbers and integrity…
…there is no such term as due diligence due to huge corporate stock climbers…by any banks…or to any banks…to any customers…to any employees…
…the same goes for the farmer who wants a loan…
…it’s as simple as numbers and integrity…
“the only winners are the lawyers”– forget the 7+billion that is destined for shareholders victimized by this atrocious scandal
The ruling is a big blow to Bill Lerach because he was only able to recover 7.5 billion for enron shareholders
So if I am reading this right, the law is going leaps and bounds out of its way to favor the uber rich and undermine the small investor, even when it looks like those defendants may be somehow implicated in the biggest scam to cripple investors to the tune of $40 billion?!?!
So if a small investor wants to sue, he or she must go it alone (yeah right) or they will not be able to sue third party defendants in a class action suit??! Am I reading this right?!?!
A outright disgrace!
So if a company goes bust and you are only able to sue principal defendants in the company, then what recourse really do investors have? I guess 10 cents on the dollar recoveries of the past were too much! Sickening that the law is protecting those that need the least protection the most while throwing the small investor to the lions! AN ABSOLUTE DISGRACE!!!!
Here’s my opinion on this…
Does this decision make class actions, in company fraud cases, virtually impotent? Something sure stinks here.
I always knew the little guy gets screwed, but never so blatantly obvious…this is soooooooooo wrong. My empathies and prayers go to those burned by this tragedy.
Wall street scum are the lowest form of life and so are those that protect them.
I am incredulous after reading this news. Just speechless. How could this be allowed to happen?
Figures:
Enron, once the seventh-largest company in the U.S., entered bankruptcy proceedings in December 2001 when accounting tricks could no longer hide billions of dollars in debt. The collapse wiped out thousands of jobs, more than $60 billion (all figures U.S.) in market value and $2 billion in pension plans.
Thank goodness the Fifth Circuit saw fit to throw out this obvioulsy frivolous lawsuit. Its about time our court system stands up to these types of frivolous suits and denies the plaintiffs their day in court. As a matter of fact, these types of suits ought to be outlawed. Who do I have to call to get a law passed to outlaw these types of suits? We don’t need them!!!!
This is a fantastic result. Not that many people really lost any money due to the actions of these defendants anyway. This is just another sign that our Tort Reform efforts are really paying off. Our companies are our saviours and should not have to answer to these types of suits. The Fifth Circuit obviously understands our position.
Who’s pockets are being lined by this decision? Surely not the real victims.
To those who have commented who are ignorant: The plaintiffs case has not been thrown out; it is still viable. The 5th Circuit merely ruled that the case may not proceed as a class action under well known and well settled rules long the law in the U.S. 5th Circuit, i.e. cases in which individual reliance is an element of recovery are not well suited to class certification…that’s it. Proponents of class action litigation see it (unlike the 5th circuit) merely as a wealth distribution system which does an end around the political system. Class action plaintiffs’ lawyers see it as a way to get filthy rich under the guise of “justice”.
No one was paid off…the court didn’t make a political decision (which many want)…it didn’t succumb to anti Enron sentiment and ignore the law. It simply applied the well settled law to the facts and denied class certification.
Well said 5th Circuit Rules. The key, it didn’t succumb to anti-Enron sentiment. If only such could be claimed about certain judges at the district court level.
all aspiring fraudsters should closely study the decision as a how-to manual for avoiding liability. what a powerful addition to the wall street toolchest.
You wrote:
“The plaintiffs case has not been thrown out; it is still viable. The 5th Circuit merely ruled that the case may not proceed as a class action under well known and well settled rules long the law in the U.S. 5th Circuit…”
For most investors, there is no difference in the two. This ruling disgusts me and it should for all those that care about the little guy, too.
Actually, the opinion overturns class certification against the “secondary actor” banks. Nothing in this opinion prevents the class action proceeding against primary actors. The banks were the “deep pockets” brought sued under the most tenuous legal arguments. The 7.4 billion recovered in settlements from the banks can be viewed as a windfall for Enron investors and their attorneys. If this precedent had existed prior to Enron’s collapse, there would have been no such settlements.
Those of you who think this a an exmaple of the little guy getting squashed, you don’t really get it. Enron went bankrupt because scores of now-convicted felons worked there. They lied to everyone, including the banks. But here is the real point: just because $40 billion in Enron shareholder value was wiped out, does that mean we should now take $40 billion from the shareholders of CSFB or Barclays (while Lerach takes 25% off the top)? Absolutely not. CSFB and Barclays have employees too, and their retirements are deeply tied to the fate of CSFB and Barclays. Should their retirements be lost or diminished becuase of a bunch of crooks in Houston? No way! The class action system is just a bogus way to move money from one set of shareholders (CSFB/Barclays) to another (Enron’s) while the class action lawyers take their 25% cut. Who can possibly think that is the fair way to remedy the work of the bunch of ADMITTED FELONS (Fastow, Causey, Kopper, and on and on) and CONVICTED FELONS (Lay, Skilling) who ran Enron. There is no reason to make another set of shareholders suffer due to Enron’s shareholders’ misfortune (and failure to elect a competent Board to oversee Enron’s criminal managers).
Enough about the little guy, why do you think that if CSFB and Barclays were held liable for their clear wrongdoing, it would affect their employees? The Enron shareholder losses are directly related to the stock they held becoming worthless. The stockholders of the banks would likely not be affected at all by the payments.
Enough about the little guy, why do you think that if CSFB and Barclays were held liable for their clear wrongdoing, it would affect their employees? The Enron shareholder losses are directly related to the stock they held becoming worthless. The stockholders of the banks would likely not be affected at all by the payments to the victims.
Enough about the little guy, why do you think that if CSFB and Barclays were held liable for their clear wrongdoing, it would affect their employees? The Enron shareholder losses are directly related to the stock they held becoming worthless. The stockholders of the banks would likely not be affected at all by the payments to the victims.
“Enough” you are wrong. The allegations were - and the evidence supported according to the 5th Circuit’s opinion - that the banks were knowingly engaged in a fraudulent scheme and made tens of millions from that same scheme. The banks most certainly were not “lied to.” The 5th Circuit just gave them a free pass for intentionally fraudulent conduct.
When a company of this size goes bust, investors will likely get nothing from the primary actors. That’s roughly $60 billion in losses that people will not recover from. That’s a lot of families feeling a lot of pain.
And if the banks “participated knowingly in a scheme to defraud investors in Enron’s collapse” as alleged, since when does that NOT make the banks primary players?
You people siding with such white-collar wall street whores that were alleged to be in on the scheme of small-investor ravaging as argued in exhibit “E”, just sicken me. Enwrong.
The paper quoted:
The basic holding of the court is that even if the banks participated knowingly in a scheme to defraud investors in Enron’s collapse, you cannot have a class action against the banks.
1:27, respectfully, even a casual reading of the Fifth Circuit’s opinion reveals no such finding on the facts. What the Fifth Circuit found was that even if the facts as alleged were true, the banks at most aided and abetted primary violators, which provides an insufficient basis for liability under the Supreme Court’s holding in Central Bank. If any court deprived Enron shareholders of recovery against the banks, it was the Supreme Court 12 years ago, not the Fifth Circuit yesterday.
Moreover, no such factual finding was even made at the district court level. Motions for summary judgment for the three bank defendants in the class cert appeal were pending at the time of the Fifth Circuit’s opinion. As you should know if you have any background in the law, CSFB and Merrill’s unsuccessful motions to dismiss indicate that the district court found that the facts as alleged were sufficient to support a claim, but bear little significance for the sufficiency of the facts as entered into evidence.
To those who insinuate that the investment bankers were obviously complicit in the Enron malaise: I assert that it is quite probable that the banks were as duped by the Enron schemesters just as much as the Enron employees and shareholders were. History has numerous examples of banks, auditors, accountants, etc. all being duped by determined fraudsters. Ask the Eddie Z. guy who often posts here. Look at the ZZZZ Best case. Hoover vacuum… The list goes on. Once these cases broke open, people often asked how could we have missed all that. But, they did…
I’m not infering guilt or inocence in the specific Enron case here, but the class tort that was ruled on here seems much more about the deep-pocket strategies of greedy lawyers than anything else…
Or, look at it another way: was Enron’s over-inflated stock price the direct result of getting transaction loans from banks? Don’t think so…
Boy that will be a lot of extra Ferrari’s in the quintuple garages of those bank execs that look to be getting a “get out of liability” free card by the 5th circuit.
People, seriously you should all write your politicians, media (and anyone else that may be able to make a difference and is willing to listen) and voice your outrage about this ruling.
The 5th circuit has issued other “anti-shareholder” decisions in the past. This is not their first time. I am appalled by this.
Have the law honor the actual victims, how’s that for refreshing?! I am disgraced by the system.
This is NOT an anti-shareholder deicision. This was a court reminding greedy class action lawyers what the Supreme Court decided 12 years ago. Enough of the whining. Berclays and CSFB have shareholders and employees too. Isn’t it obvious that forcing those two banks to split a $40 billion judgment in favor of the Enron shareholders would those banks, their employees and their shareholders? Of course they would suffer. That would wipe out tons of jobs and shareholder value. Why aren’t you people whining that 25% of the $7.7 billion already recovered will go the the class action lawyers? Where is the justice there? And why aren’t you whining that Andy Fastow, the mastermind of this whole debacle only got six years? HELLO?! Get a clue. Barclays and CSFB already lost nearly a billion dollars in loans they made to Enron in reliance on Enron’s lies. These same banks that you think are screwing the little guy already lost more money than any other shareholder. Now they should pay another $40 billion, with $10 billion going to Lerach? PLEASE!!!
It seems to me that the impetus of the PSLRA was to thwart meritless class actions from moving forward, not to prevent investors with legitimate claims (from legitimate cases such as Enron) from getting their due process.
There is no way one can feel sorry for the underwriters in this case, especially when they were involved in the transactions that brought down this company.
I am very concerned as to what this decision will mean to both Enron shareholders and shareholders of future Enrons.
It seems to me that the impetus of the PSLRA was to thwart meritless class actions from moving forward, not to prevent investors with legitimate claims (from legitimate cases such as Enron) from getting their due process.
There is no way one can feel sorry for the underwriters in this case, especially when they were involved in the transactions that helped bring down this company.
I am very concerned as to what this decision will mean to both Enron shareholders and shareholders of future Enrons.
involvement, as alleged by the plaintiffs
Obviously if the Enron shareholder action went to court and it settled, it would be for far less an amount than $40 billion. Any settlements from these banks would lead to a temporary blip in its stock price as it took a one-time right off.
This, of course, is a far preferable outcome than the fate suffered by Enron investors whom watched $60 billion of investor equity evaporate into vapor. Poof. These are the people we should feel sorry for.
And let’s be real here. When you say the banks “lost more money than any other shareholder”, I say get a clue.
The market valuation of those banks in question, is in no way comparable to the net worth and horrific losses suffered by the Enron investors on a dollar-per-net-worth analysis.
The banks would whether any decision and settlement ultimately reached in Re: Enron securities litigation…but the same can not be said for the poor Enron shareholders; many whom found their lives turned upside down because of their sustained losses and have struggled just to make ends meet. Now that’s what I call injustice and laws that prove woeful in protecting them.
My thoughts and prayers are with those Enron shareholders hurt by this decision. Try and keep your chins up, you are surely not alone in this. Never give up.
Calpers will not let Lerach take 25%. If memory serves me correctly, figure is slightly under 10%.
Another route could be for the class-action plaintiffs to seek an “en banc” ruling from the Fifth Circuit, meaning a ruling from the entire court, not just a three-judge panel. But Ajamie said individual investors may not have any further recourse now that the class action status has been removed.
How can they let this decision be the last word here? How about the 30 states that sided with Enron shareholders, what happens to their voice? Majority should rule, there is NO WAY that the 5th circuit decision should be the final word!
Frankly, I don’t know how some of these people involved in such hurtful decisions can sleep at night. There is something very, very wrong with this decision.
How crooked, corrupt and a con this system is. Downright filthy. If you are not outraged, you are not paying attention.
30 states take side of Enron shareholders seeking damages from Wall Street banks
By Marcy Gordon, AP Business Writer | January 9, 2007
WASHINGTON –Thirty states have taken the side of Enron shareholders seeking damages from big investment banks in a federal case over the banks’ alleged role in Enron’s accounting fraud.
The states’ move puts them at odds with a legal stance the Securities and Exchange Commission staff had considered taking in support of one of the banks, Merrill Lynch & Co., but appears now to have decided against.
In a brief filed Monday in a federal appeals court, attorneys general from the 30 states use the SEC’s legal arguments in 2002 Enron litigation to make the case that Merrill, Credit Suisse and the other investment banks should be held liable as participants in accounting fraud. The SEC pursued Merrill, JP Morgan Chase & Co. and Citigroup Inc. over their role in Enron’s scheme, winning tens of millions of dollars in settlements with the investment powerhouses in 2003.
The states, in the brief written by Texas Attorney General Greg Abbott, maintain that the Wall Street banks are liable “for directly participating in the Enron securities fraud” and “for manipulative and deceptive devices and contrivances.” Residents of the 30 states who were shareholders were injured by Enron’s collapse, “and their rights, and the rights of other innocent citizens in future Enrons should be protected,” the filing says.
As previously reported by The Associated Press, attorneys for Merrill recently asked the SEC to file a brief in the 5th U.S. Circuit Court of Appeals in New Orleans in support of the firm’s position that on legal grounds, it should not be held liable in the case — and the agency staff had considered doing so.
The staff is not expected to recommend to the SEC commissioners that the agency file such a brief in the case, making it unlikely that it will happen, a person familiar with the matter said Tuesday. He spoke on condition of anonymity because he was not authorized to speak officially on the matter.
The lawsuit on behalf of Enron shareholders seeks billions of dollars in damages from the investment banks. The federal judge presiding over the litigation, U.S. District Judge Melinda Harmon in Houston, has granted it status to proceed as a class-action suit. That decision is being reviewed by the appeals court in New Orleans. If the appeals court overturned Harmon’s ruling, the suit against the investment banks could be tossed out.
Merrill’s position, as expressed in papers it filed last month, is that in granting class-action status to the shareholders, a federal judge accepted an “expansive” theory put forward by their attorneys that wrongly holds all parties — including those that aided Enron’s scheme but didn’t know its true purpose– liable for losses sustained by investors.
The attorneys representing Enron shareholders argue that the investment banks played key roles in Enron’s “scheme to defraud.” Under a 1995 law, a single defendant can be held liable for paying the entire amount of damages if the judge determines that the defendant knowingly violated the securities laws.Continued…
30 states take side of Enron shareholders seeking damages from Wall Street banks
By Marcy Gordon, AP Business Writer | January 9, 2007
WASHINGTON –Thirty states have taken the side of Enron shareholders seeking damages from big investment banks in a federal case over the banks’ alleged role in Enron’s accounting fraud.
The states’ move puts them at odds with a legal stance the Securities and Exchange Commission staff had considered taking in support of one of the banks, Merrill Lynch & Co., but appears now to have decided against.
In a brief filed Monday in a federal appeals court, attorneys general from the 30 states use the SEC’s legal arguments in 2002 Enron litigation to make the case that Merrill, Credit Suisse and the other investment banks should be held liable as participants in accounting fraud. The SEC pursued Merrill, JP Morgan Chase & Co. and Citigroup Inc. over their role in Enron’s scheme, winning tens of millions of dollars in settlements with the investment powerhouses in 2003.
The states, in the brief written by Texas Attorney General Greg Abbott, maintain that the Wall Street banks are liable “for directly participating in the Enron securities fraud” and “for manipulative and deceptive devices and contrivances.” Residents of the 30 states who were shareholders were injured by Enron’s collapse, “and their rights, and the rights of other innocent citizens in future Enrons should be protected,” the filing says.
As previously reported by The Associated Press, attorneys for Merrill recently asked the SEC to file a brief in the 5th U.S. Circuit Court of Appeals in New Orleans in support of the firm’s position that on legal grounds, it should not be held liable in the case — and the agency staff had considered doing so.
The staff is not expected to recommend to the SEC commissioners that the agency file such a brief in the case, making it unlikely that it will happen, a person familiar with the matter said Tuesday. He spoke on condition of anonymity because he was not authorized to speak officially on the matter.
The lawsuit on behalf of Enron shareholders seeks billions of dollars in damages from the investment banks. The federal judge presiding over the litigation, U.S. District Judge Melinda Harmon in Houston, has granted it status to proceed as a class-action suit. That decision is being reviewed by the appeals court in New Orleans. If the appeals court overturned Harmon’s ruling, the suit against the investment banks could be tossed out.
Merrill’s position, as expressed in papers it filed last month, is that in granting class-action status to the shareholders, a federal judge accepted an “expansive” theory put forward by their attorneys that wrongly holds all parties — including those that aided Enron’s scheme but didn’t know its true purpose– liable for losses sustained by investors.
The attorneys representing Enron shareholders argue that the investment banks played key roles in Enron’s “scheme to defraud.” Under a 1995 law, a single defendant can be held liable for paying the entire amount of damages if the judge determines that the defendant knowingly violated the securities laws.
Page 2 of 2 –
The 28-page brief filed by the 30 states cites criteria proposed in 2002 by the SEC in legal arguments to determine liability of participants in a deceptive scheme. The idea expounded by the SEC was that deception in the form of a false picture of a company’s revenues can be made by acts as well as words.
That means a participant in a scheme would do more than aid and abet it, by engaging in a transaction whose main purpose is to create such a false financial picture — and therefore should be held liable.
To accept the investment banks’ interpretation of legal precedent “would result in virtual immunity for banks, law firms, accountants and other securities professionals from private liability in many cases,” the states’ brief says. Contradicting the securities laws, it says, is “the view that those crafty enough to benefit from participating in a securities fraud while carefully avoiding the public attribution of a false statement to them can escape liability. …”
Andrew Fastow, Enron’s now-imprisoned former finance chief pegged as the mastermind behind the complex financial schemes that ultimately doomed the high-flying energy company, provided testimony this fall in the shareholder litigation.
He answered yes, for example, when asked whether some of the transactions Enron conducted with its investment banks created the false appearance of profits and cash flow.
In addition to Texas, the attorneys general signing the brief were from Alabama, Arizona, Arkansas, California, Connecticut, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Montana, New Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Utah, Vermont and West Virginia.
In 2003, Merrill agreed to pay $80 million to settle the SEC’s civil charges that it participated in Enron’s phony sales of floating power plants, designed to inflate the company’s earnings in 1999. The firm neither admitted nor denied wrongdoing in the settlement.
JP Morgan Chase and Citigroup also paid civil fines in similar agreements with the SEC. Four former Merrill executives were convicted of fraud and conspiracy in 2004 for their roles in the deal.
Along with Merrill and Credit Suisse, other defendants in the shareholders’ suit are Royal Bank of Canada, Royal Bank of Scotland and Toronto-Dominion Bank.
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On the Net:
Securities and Exchange Commission: http://www.sec.gov
The only crap here is the uninformed hysteria of the Enron-haters. Those who call the 5th Circuit decision corrupt and a con have mindlessly bought all the creative crap feed to them by the likes of Lerach. Such group think has vastly distorted the tragedy of Enron’s collapse, revealing just how badly broken the wheels of justice are in this country. The comment that Majority should rule, there is NO WAY that the 5th Circuit should be the final word! is the ugly voice of the lynch mob, in capital letters and with exclamation point. Shame.
Well said Enough of Enough. Lynch mob mentality is pervasive in our culture and the law and the facts can be swept aside in an instant. Don’t we adhere to the rule of law here in the United States? Or are we headed toward the justice of the undeveloped world where court decision are more often based on who happens to be in power or on emotion rather than the law and the facts?
Blog here all you want. If you want to send a real message, boycott Merrill Lynch, CSFB and Barclays. Pull everything you have out. Then the fate of their retirement account will still be connected!
And they were given a free pass by the 5th district court?!?! Read this, very enlightening. What a crooked shame.
http://www.ucop.edu/news/enron/art408.htm
Banks, law firms were pivotal in executing Enron securities fraud
* Nine banks hid loans, set up false investments and facilitated phantom Enron sales
* Bank executives profited personally from “Ponzi scheme”
* Law firms structured phony deals
* Additional insider trading documented
“As we have recognized, class certification may be the backbreaking decision that places ‘insurmountable pressure’ on a defendant to settle, even when the defendant has a good chance of succeeding on the merits,” the 5th Circuit opinion said.
.
.
Insurmountable pressure on a defendant to settle? How about this decision putting insurmountable pressure on the small investor to bow out of their legal recourse? Doesn’t the little guy matter much anymore, or are we all so blind to what is really going on here.
Looks like the banks won’t be sending any “charitable donations” and thank you cards to the 5th circuit otherwise one might begin to wonder.
This latter part said in tongue and cheek, but this decision sure does wreak sulfur. JMO
How is a normally proud American supposed to be proud of a decision like this?
If this decision stands, March 19, 2007 would be a very dark day for the average American investor.
Just shameful.
It’s hard to walk away from the fight knowing that some of Enron’s favorite financial finaglers will get away. Merrill Lynch, after all, agreed to hold on to barges used for generating electricity in Nigeria long enough for Enron to book the transaction as a sale and make its earnings numbers.
Then Enron, through chief fabrication officer Andrew Fastow, agreed to take the barges off Merrill’s hands, according to Fastow’s sworn testimony last year.
CSFB was a major investor in the LJM partnerships that Fastow ran on the side to grease deals such as the barge transaction.
From the witness stand during last year’s trial of Lay and Skilling, Fastow described how he enlisted investment banks in developing financial schemes that kept the debt-sodden Enron afloat.
Fastow is credited as Enron’s financial engineer, constructing complicated structured finance deals. Often, though, he outsourced the design work. He encouraged his banker cronies to unleash their creative juices.
Pantheon of deceit
Enron spread deals around Wall Street, and the investment banks wallowed forth like slop-starved hogs. Citigroup, JPMorgan, Merrill, CIBC and others all clambered for a seat in Enron’s pantheon of deceit.
Enron needed to disguise loans as revenue or other transactions to trick the rating agencies. If they’d known Enron was taking on debt, they would have cut its credit ratings. The stock would have fallen and Enron and its stock-backed partnerships would have unraveled years earlier.
It seems unjust that Merrill and its remaining co-defendants would escape a big civil penalty for their role in keeping the lie of Enron alive.
